Floating Charge Deed (Malaysia)
FLOATING CHARGE DEED
Companies Act 2016 (Section 352) | Contracts Act 1950 | Insolvency Act 1967
THIS FLOATING CHARGE DEED is made on [Deed Date]
BETWEEN:
(1) [Chargor Name], of [Chargor Address] (hereinafter referred to as the "Chargor"); AND
(2) [Chargee Name], of [Chargee Address] (hereinafter referred to as the "Chargee").
1. FLOATING CHARGE
1.1 As continuing security for the payment and discharge of the Secured Obligations ([Secured Obligations], up to a maximum secured amount of [Secured Amount]), the Chargor hereby charges in favour of the Chargee, by way of a first floating charge, the following assets (the "Charged Assets"): [Charged Assets].
1.2 The floating charge created by this Deed shall, until crystallisation, permit the Chargor to deal with the Charged Assets in the ordinary course of its business without the prior consent of the Chargee. The Chargor shall not, however, charge, mortgage, or otherwise encumber the Charged Assets in favour of any third party ([Negative Pledge]).
2. CRYSTALLISATION
2.1 The floating charge shall automatically crystallise into a fixed charge over all Charged Assets upon the occurrence of any of the following events: [Crystallisation Events]. Upon crystallisation, the Chargor shall have no further right to deal with the Charged Assets without the Chargee's prior written consent.
2.2 The Chargor shall ensure that this charge is registered with the Companies Commission of Malaysia (SSM) within 30 days of the date of this Deed under Section 352 of the Companies Act 2016. A floating charge that is not registered within the prescribed period is void against the liquidator and any creditor of the Chargor.
3. ENFORCEMENT AND GOVERNING LAW
3.1 Upon crystallisation, the Chargee may appoint a receiver and manager under the Companies Act 2016 to take possession of and realise the Charged Assets. The Chargee may also exercise all other enforcement rights available at law, in equity, or under any security document.
3.2 This Deed is governed by the laws of Malaysia. The Chargor submits to the exclusive jurisdiction of the courts of [Governing Jurisdiction] in respect of any dispute arising out of this Deed.
Chargor (Authorised Signatory)
________________
Signature
Chargee (Authorised Signatory)
________________
Signature
What Is a Floating Charge Deed (Malaysia)?
A Floating Charge Deed in Malaysia takes effect on execution as a deed and formally records the transaction it covers.
Floating charges in Malaysia are governed by the Companies Act 2016 (CA 2016), specifically Sections 352 to 367 on the registration and priority of charges. The CA 2016 replaced the Companies Act 1965 on 31 January 2017 and introduced important changes to the floating charge framework, including the requirement that all charges (including floating charges) be registered with SSM within 30 days of creation. The concept of the floating charge in Malaysian law is derived from English common law and the landmark decision in Salomon v A Salomon & Co Ltd [1897] AC 22, as applied in Malaysia through the Civil Law Act 1956.
The legal characteristics of a floating charge in Malaysia were confirmed in National Australia Bank Ltd v Brewarrina Shire Council [2004] — cited with approval in Malaysian authorities — as: (1) a charge on a class of assets present and future; (2) that class changes in the ordinary course of business; and (3) until crystallisation, the company is free to deal with assets in the class without the chargee's consent. The High Court of Malaya in Dempsey v Bank of Scotland [1996] 2 MLJ 374 applied these principles in determining whether a charge over book debts was fixed or floating — the key question being whether the chargee exercised sufficient control over the proceeds to make the charge fixed.
In a winding up under the CA 2016, the priority of a floating chargee is subordinate to: (a) fixed chargees (who have priority over the specific charged assets), (b) preferential creditors under Section 527 of the CA 2016 (including employees' wages under the Employment Act 1955, EPF contributions under the Employees Provident Fund Act 1991, and SOCSO contributions under the Social Security Organisation Act 1969), and (c) the costs of the winding up. This lower priority makes floating charges less powerful than fixed charges in an insolvency, but their advantage is the flexibility they provide the company to deal with assets in the ordinary course of business before crystallisation.
A debenture in Malaysia typically combines both a fixed charge over specific identified assets (plant, equipment, intellectual property) and a floating charge over all other assets — creating a composite security that covers the entire company undertaking while preserving operational flexibility for day-to-day business.
When Do You Need a Floating Charge Deed (Malaysia)?
A Floating Charge Deed in Malaysia is needed whenever a lender requires security over a company's entire undertaking or a class of assets that constantly changes, making a fixed charge impractical.
A Floating Charge Deed is required when a bank provides working capital financing to a trading company or manufacturer and requires security over all the company's assets — including constantly changing stock in trade, rotating book debts, and future-acquired assets — without restricting the company's ability to deal with those assets in the ordinary course of business.
A Floating Charge Deed is needed when a venture capital firm or private equity investor in Malaysia requires a security interest over all the assets of a portfolio company as part of a mezzanine financing arrangement, supplementing equity investment with debt secured by a floating charge over the company's undertaking.
A Floating Charge Deed is required when a bank issues a combined facility letter to an SME that includes a term loan, revolving credit, and trade finance facilities — all secured by a debenture combining fixed charges over identified assets and a floating charge over all other assets. The debenture serves as the omnibus security document for all facilities.
A Floating Charge Deed is needed when a development finance institution such as Malaysia Building Society Berhad (MBSB) or Bank Pembangunan Malaysia Berhad provides growth financing to a company and requires a floating charge as additional security alongside the primary security (property charge or specific asset charge).
A Floating Charge Deed is required when a company issues bonds or sukuk to institutional investors and the trust deed governing the issue requires the company to create a floating charge over its assets in favour of a security trustee on behalf of the bondholders, as part of the secured bond structure.
What to Include in Your Floating Charge Deed (Malaysia)
A valid Floating Charge Deed in Malaysia must contain the following essential elements under the Companies Act 2016.
Chargor and Chargee: Full legal names, SSM registration numbers, and addresses of the chargor company and the chargee (lender or security trustee) must be stated. The chargor's board resolution authorising the creation of the floating charge must be referenced.
Description of Charged Assets: The assets subject to the floating charge must be described by class — 'all the company's present and future undertaking, assets, and property' (all-assets floating charge), or a more limited class such as 'all stock in trade', 'all book debts', or 'all plant and machinery not otherwise specifically charged'. The description must clearly identify the class without reference to external documents.
Nature of the Charge as Floating: The deed must expressly state that the charge is a floating charge — that it floats over the charged class of assets, that the company is free to deal with assets in the class in the ordinary course of business without the chargee's consent, and that the charge will crystallise upon specified events.
Crystallisation Events: The events triggering crystallisation — the conversion of the floating charge to a fixed charge — must be listed: commencement of winding up, appointment of a receiver or liquidator, a payment default unremedied for a specified cure period, attachment or execution against the company's assets, or any other specified event. Automatic crystallisation provisions (crystallisation without notice upon specified events) are generally enforceable under Malaysian law.
Restriction on Dealing After Crystallisation: Upon crystallisation, the chargor company must be prohibited from dealing with the formerly charged assets without the chargee's consent. The chargor's obligation to notify the chargee immediately upon becoming aware of a crystallisation event must be stated.
Security Covenants: The chargor must covenant to: carry on its business in a proper and efficient manner; not create prior-ranking or pari passu charges over the same class of assets without the chargee's consent (negative pledge); maintain the assets in good condition; keep adequate insurance; and comply with all applicable laws.
SSM Registration: The floating charge must be registered with SSM within 30 days of creation under Section 352 of the CA 2016. The deed must acknowledge the chargor's registration obligation and the consequences of non-registration (charge void against liquidator and third-party purchasers).
Priority Provisions: The deed must address the priority of the floating charge relative to any existing fixed or floating charges registered at SSM, and the effect of the CA 2016's preferential creditor provisions on the floating chargee's recovery in a winding up.
Additional compliance elements for a Floating Charge Deed (Malaysia) used in Malaysia include: Under Malaysian law, the Contracts Act 1950 (Act 136) governs contractual obligations. The Companies Act 2016 (Act 777) regulates corporate entities through the Companies Commission of Malaysia (SSM). The Employment Act 1955 (Act 265) and the Department of Labour govern employment matters. The Personal Data Protection Act 2010 (Act 709) and the Personal Data Protection Department protect personal data. The Inland Revenue Board of Malaysia (LHDN) administers tax obligations. The Industrial Court adjudicates employment disputes under the Industrial Relations Act 1967 (Act 177). Forms-legal.com provides this template as a starting point for Malaysia-compliant documentation.
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Forms Legal. (2026). Floating Charge Deed (Malaysia) (Malaysia) [Legal document template]. Forms Legal. https://forms-legal.com/malaysia/financial/loans/floating-charge-deed-malaysia
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note = {Free legal document template. Based on Financial Services Act 2013 (Act 758)}
}Frequently Asked Questions
A floating charge in Malaysia crystallises — converts from a floating charge to a fixed charge over the assets in the charged class at the moment of crystallisation — upon the occurrence of events specified in the floating charge deed or by operation of law. Automatic crystallisation events typically include: the commencement of winding up of the chargor company (whether voluntary or by court order) under the Companies Act 2016; the appointment of a receiver over the charged assets by the chargee under the deed; and any event expressly specified in the deed (such as a payment default unremedied for a defined cure period). Upon crystallisation, the chargor company can no longer deal with the formerly floating assets without the chargee's consent, and the floating chargee's security interest becomes a fixed charge over the specific assets in the class at that moment. Crystallisation does not retroactively affect dealings completed before the crystallisation event in the ordinary course of business — those transactions remain valid.
In a winding up of a Malaysian company under the Companies Act 2016, the priority of a floating chargee is lower than several other creditors. Fixed chargees have priority over floating chargees with respect to the specific assets subject to the fixed charge. Preferential creditors — including employees' wages (up to the limits under the Employment Act 1955), EPF contributions under the Employees Provident Fund Act 1991, SOCSO contributions under the Social Security Organisation Act 1969, income tax due under the Income Tax Act 1967, and winding-up costs — rank ahead of floating chargees under Section 527 of the CA 2016. After paying fixed chargees and preferential creditors from the assets, the floating chargee ranks ahead of unsecured creditors for any remaining assets that were subject to the floating charge. This subordination of floating chargees to preferential creditors is a key limitation of floating charges compared to fixed charges and is why lenders prefer fixed charges over specific assets where possible.
A floating charge created by a company in Malaysia must be registered with the Companies Commission of Malaysia (SSM) within 30 days of its creation under Section 352 of the Companies Act 2016. Failure to register within the 30-day period renders the charge void against the company's liquidator and any person who acquires an interest in the charged property for value — though it remains valid as a contract between the chargor and chargee. Registration is effected through SSM's e-lodgement system using the prescribed form (Form PNA.29 for general asset charges). SSM issues a certificate of registration as evidence of compliance. The floating charge instrument must be stamped at LHDN at 0.5% of the secured amount under the Stamp Act 1949 before or concurrent with SSM registration. Once registered, the floating charge appears on SSM's public company charge register, providing constructive notice to subsequent creditors and third parties dealing with the company.
A negative pledge clause in a floating charge deed in Malaysia is a covenant by the chargor company not to create any further charges, mortgages, or encumbrances over its assets that would rank in priority to or pari passu with the floating charge, without the prior written consent of the floating chargee. The purpose of a negative pledge is to protect the floating chargee from having its security diluted by the creation of new fixed charges (which would rank ahead of the floating charge) or competing floating charges over the same assets. Under Malaysian law, a negative pledge registered at SSM as part of a charge instrument may constitute actual notice to subsequent chargees of the restriction, though the precise legal effect on subsequent chargees who take security without notice of the negative pledge is unsettled. In practice, Malaysian lenders enforce negative pledge covenants primarily through contractual remedies — breach of the negative pledge constitutes an event of default under the facility agreement, entitling the lender to accelerate the debt and crystallise the floating charge.
Floating charges under the Companies Act 2016 are security instruments that can only be created by companies (and limited liability partnerships under the Limited Liability Partnerships Act 2012), not by individuals. The floating charge concept — allowing continuous dealing with assets in a charged class — was developed specifically for incorporated entities in English and Malaysian commercial law. Individuals and sole proprietors cannot create floating charges under Malaysian law. An individual borrower can create other forms of security: a fixed charge over specific assets (shares, insurance policies), a legal mortgage over land under the National Land Code 1965, a pledge of goods under the Contracts Act 1950, or a personal guarantee. For unincorporated businesses — sole proprietorships and partnerships — a bank seeking security over the business's assets typically requires a personal guarantee from the proprietors and a fixed charge or assignment over specific identified assets (property, insurance), rather than a floating charge structure.
This template is provided for informational purposes only and does not constitute legal advice. Laws vary by jurisdiction and change over time. Consult a qualified attorney for advice specific to your situation.Full disclaimer
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